Cocoa Prices See Significant Rise

Today, cocoa prices on the March ICE NY market climbed by 430, a rise of 8.44%, while the December ICE London Cocoa #7 saw an increase of 171, or 4.52%. This surge marks a one-week high for cocoa.

Short covering in cocoa futures began as the dollar index dipped to a 1.5-week low. Additionally, decreasing stock levels at ICE are supporting cocoa prices, with the current stockpile at U.S. ports down to 1,709,185 bags, the lowest in over eight months.

There’s excessive short positioning among London Cocoa funds, which might intensify the current short covering. A recent report indicated that funds raised their net short position in London Cocoa Futures by 3,737, bringing the total to 22,748, the highest seen in over four years.

Nevertheless, an anticipated large global cocoa supply is putting pressure on prices. Last week, cocoa prices dropped to a 1.75-year low, fueled by expectations of a robust harvest in West Africa. Farmers in Ivory Coast reported that their cocoa trees are thriving due to favorable dry weather, and those in Ghana noted that better conditions are speeding up the growth of their cocoa beans.

In good news for consumers, chocolate maker Mondelez stated that the latest cocoa crop in West Africa is 7% above the five-year average and well above last year’s figures. Harvesting in Ivory Coast has just started, and farmers are optimistic about the quality of their beans.

On another front, the European Parliament has approved a one-year extension of deforestation regulations, which could maintain cocoa supply levels and put further pressure on prices. The EUDR aims to combat deforestation linked to EU imports, including cocoa, allowing continued trade from regions where deforestation is a concern.

Prices also dropped following an announcement from the Trump administration to remove a 10% reciprocal tariff on cocoa and a significant 40% tariff on food imports from Brazil, a top cocoa producer.

Furthermore, reduced amounts of cocoa shipping from Ivorian ports may help stabilize prices. Government data indicates that Ivorian shipments from October 1 to November 23 amounted to 618,899 tonnes, a 3.7% decrease from the previous year’s 642,500 tonnes during the same timeframe.

On the downside, global demand for cocoa remains weak. The CEO of Hershey expressed disappointment over this year’s Halloween chocolate sales, which are typically strong, accounting for nearly 18% of U.S. candy sales. Moreover, the Asia Cocoa Association reported a 17% drop in cacao crushing volume in Asia for the third quarter, marking the lowest level in nine years. In Europe, the situation is similar, with a 4.8% decline reported.

In North America, even though cocoa milling volumes increased slightly, chocolate candy sales plummeted by over 21% in recent analyses compared to last year.

On a more positive note, cocoa production in Nigeria, the fifth largest producer, is projected to fall. Predictions for the 2025/26 crop year suggest a significant decrease, which could support cocoa prices as well. However, Nigeria’s cocoa exports remained unchanged year-on-year in September.

Finally, the International Cocoa Organization has projected a global cocoa deficit of 494,000 tonnes for the 2023/24 season — the largest deficit in decades. The organization also forecasts a modest surplus for 2024/25, as production levels are expected to rise slightly year-on-year.